Self Employed Articles
Turning your passion into a full-time business is a big step. But when your business starts to catch on, you realize that you made the right decision. Now, the next move is to sit down and look for an accountant for your self-employed business that is near you. An accountant will help you get your growing finances and tax obligations in order.
You can do a lot of money-related tasks on your own, especially when you are just starting. Business-minded people do not stop at the basics. If your aims are high and future expansion is on your agenda, hiring an accountant for self-employed near you is critical. Learning about the Colorado self-employment tax will give you an idea of the challenges of accounting for your small business.
What Does it Mean to Be Self-Employed from an Accountant’s Perspective?
Because you perform a job and collect a fee for it doesn’t mean that you are already “in business” unless you do it regularly and it becomes your source of income. Being self-employed and managing a small business means having the following:.
- A business structure
- Marketing Plan
- A product or service
- A separate and exclusive office or workspace
- It’s operational
- A separate checking account for your business
Running your own small business also means that you will have to take care of your self-employed taxes separately. Worrying about the tax would be a strong indicator that you are “in business”.
Guide for Creating Self-Employed Small Business
Having a start-up business, whether it’s small or big, requires you to go through a series of critical set-up processes. It is important to take care of these matters right away to make sure you are 100% ready to move forward with less burden on your shoulder.
Separate business and personal finances
When you set up a small business, make sure to keep it apart from your personal matters, especially in terms of finances. Doing this will make bookkeeping and accounting tasks easier for you.
Have an exclusive space for your business if you are operating from your home but it’s much better to rent an office where you can conduct business exclusively. It’s the ideal way to go if you do not want your personal information out in public.
Figure out what business structure you want and look for an accountant for self-employed businesses near you to guide you through it!
Decide what kind of business entity you will be registering as but it is advisable if you can find an accountant for self-employed near you to help you. There are four types: sole proprietorship, partnership, corporation, and LLC (limited liability company).
If you are doing business as an individual, registering as a sole proprietor or LLC would be fine. If with one or more business partners, you can opt for a partnership, corporation (S-corp or C-corp), or LLC. Each of these business structures has a different Colorado self-employment tax system and you need to be aware of the rates and deadlines.
You can spend time studying how Colorado self-employed taxes work or take the shortcut and find an accountant for self-employed individuals instead. If you like to focus on building client relations and developing your product and services, the latter would be the best option for you. A professional CPA will help you understand how self-employed taxes work and prepare the documents for you.
Apply for your own business bank account
As your small business finances need to be separate from your personal funds, it makes sense to apply for an exclusive business bank account. This will allow you to track your expenditures more easily and make smart budgeting decisions. It will also make tax preparations easier.
Different Business Structures: What Do I Need to Be as a Business Entity If I Am Self-Employed?
One of the most critical decisions you need to make as a self-employed individual is choosing the type of entity you would register as. There are four basic business entities: sole proprietorship, partnership, corporation, and limited liability company (LLC). Each entity follows varying taxation systems and has its own set of deductions. Keep in mind that the business entity does not determine your self-employment status. That said, you can still be considered self-employed under any of these business entities.
Here’s an overview:
Sole Proprietorship
As a sole proprietor, you are the sole owner and operator of the business. With this business entity, you do not need to obtain an EIN (employer identification number) but you need a BIN (business identification number). Although the EIN is not required, it is highly recommended that you still get one for social security purposes. You can get one through the IRS website.
Partnerships
If you are doing business with another person, you can register as a partnership entity. The agreement between two business owners can be verbal. But Steve of Steven J. Wick, and Associates. P.C. says he prefers to make partnership agreements formal.
For income tax filing purposes, partnerships have to obtain an EIN as required by the IRS.
Limited Liability Company or LLC
Among accountants, LLC is also known as a ‘chameleon’ entity because it allows your business to be neutral. It is also a business structure with the cheapest insurance and lets you separate business from personal matters in terms of taxes.
In Colorado, the registration fee for LLCs is $50 and $10 yearly to keep your organizational structure within the state. Even if you have no employees, you must obtain an Employer Identification Number (EIN) from the IRS for tax payments. Having an EIN will also make it easier for you to pay your taxes if you later decide to hire employees and elect your business as a corporation.
Consult an accountant for self-employed near you so you can better understand how LLC works.
Corporations
As yourself: “Do I need an accountant for my small business?” If you think a corporation is a more fitting entity for you and your partners, you may need one. Whether you are the sole owner of your small business or you have shareholders with you, you can register as a corporation. However, the self-employment tax rates in Colorado could be higher. On a positive note, you can enjoy various tax deductions that other business structures deny you.
Can I change business structures?
At some point, you may be tempted to switch from one business structure to another. The change could be due to business growth or tax advantages that you learn along the way. But are you allowed to change your business entity to another and is it easy? An accountant for self-employed near you can help you navigate your options.
Basically though, depending on the type of structure you want to transition to, you can change from a sole proprietor to a partnership. It’s easier if your business is initially registered as an LLC, allowing your business to have whatever business structure you want. However, changing from any of these entities to a corporation also changes a lot of things, not to mention the process can be complicated.
If you decide to do this, you should first find an accountant for self-employed near you for consultations. A professional CPA will give you an accurate heads-up on the changes in tax filings and walk you through the process.
Self-Employed Taxes: What You Need to Know
From an income tax standpoint, being self-employed and a sole proprietor is easiest in terms of the registration process. You can also enjoy several tax deductions as far as your business goes. However, you are required to pay an SE tax (self-employment tax). It is a self-secured medical tax, which regular employees also pay – 7.65%, shouldered by the employer, and the other 7.65% shouldered by the employee. This amounts to 15.3% which is higher than an income tax.
As a self-employed individual, you are also required to pay 15.5% in taxes if you are earning $400 and up. 2.95 of it goes to your Medicare while 12.4% goes to your social security fund and disability insurance. The SE tax must be paid quarterly and on time to avoid penalties.
In addition, you also have to pay your annual income tax. It’s another complicated issue if you are not an accountant and a professional CPA can help you figure out how much taxes you owe based on your earnings and registered business structure. You might as well start searching for an “accountant for self-employed near you early on.
All About Self-Employed Taxes
Are you required by law to file?
Then there is the process of determining your filing status, as well as figuring out if your income falls into the threshold which requires you to file income taxes. For self-employed individuals, even if your income is below the threshold requiring you to follow, it is often necessary to file your taxes anyway. This is because if you are filing with a partner, your income will have to be combined with hers. Additionally, your finished tax return is the best piece of documentation you can have to verify your income.
When it comes to small business accounting, including self-employment, it can be far more complicated to determine so many different aspects of how you should file, and what documentation you need. This is where your Fort Collins CPA comes in. They are familiar with the complexities of small business self-employment taxation, and won’t struggle to try to figure out which tax form, documents, and other paperwork you need. Also, they will be able to place you in the most appropriate filing category for your specific needs, whether that is a 1040 or a 1040 A. Your Fort Collins CPA will also be aware of numerous deductions and tax payment options, some specific to your area and even your business itself.
Paying Your Taxes
Additionally, as a self-employed individual, you have access to all the “tweaks,” and deductions that any business has. You are probably aware of some of them, but not all. One example of these “tweaks,” is when and how often to make your tax payments. Your Fort Collins CPA can help you determine which payment method is the best for you, based on several factors. For example, an annual tax bill can be quite burdensome, and most self-employed individuals and even several businesses opt for quarterly payments. You can also do a monthly payment. You do have several options when it comes to paying your federal and other taxes.
What can a self-employed individual deduct?
If you are not sure which items can be deducted, ask your small business accounting specialists. Essentially, ANYTHING that you buy, rent, or put any type of money into that is for your business usually qualifies as a deduction. Some things can be deducted entirely, others only partially.
It is prudent to start a filing system for your expenses. Any online software you like will work, but be sure and save all your receipts as well. You will usually be required to have tangible proof of your expenses. Your accountant can advise you, anytime, when you are not sure what to keep a record of. Additionally, they will know which accounting software can be the most useful and appropriate for your record-keeping, should you determine this is something you need.
If you work from home, there are several deductions for the self-employed individual. These involve determining the square footage of the workspace, as well as evaluating how much of your business time is used in that space. If for example, you rent a small warehouse, this will certainly be deductible. If you work from home, this may not be deductible — it depends on how much of your actual work is carried out from your home.
And, some things you purchase for work will actually not be considered deductions by the IRS, but investments. A simple example: you purchase a delivery van for your self-employment, thinking it will serve as a write-off. However, the IRS may see it as an investment, and not allow you to deduct the delivery van, but allow you to deduct mileage used on it for your business, maintenance costs, and other specific business-related expenses.
The IRS categorizes some of your expenses as capital, and others as expenses. And, these guidelines change frequently. Don’t assume, ask. When it comes to small business accounting, you need this information to determine what you should invest in. Your Fort Collins CPA can let you know if a specific item, piece of equipment, or service is deductible, and if so, how much.
The self-employed small business owner often can benefit more from the professional services of an accountant than just about anyone else. If you are self-employed, call your Fort Collins CPA and let them guide you through your taxes, you will be very glad you did.
Advantages and Disadvantages of Being Self-Employed
Advantages of Being Self-Employed
- You enjoy freedom in terms of work hours, the amount of work you take in, and how you want your work done.
- You can balance your work and personal life
- Earn at your own pace
Disadvantages of Self-Employment
- The self-employed taxes you have to deal with can be a daunting work
- Expect no benefits that regular employees have
- Cover the resources out of your own pocket
- Less job security
Biggest Mistakes You Can Make as a Self-Employed Small Business Owner
Individuals who try to brave the business world without support from an accountant are at risk of committing costly mistakes. Among the most common ones include:
- You can be too conservative or too liberal in terms of tax deductions, which could lead to more tax responsibilities.
- Failure to properly classify independent contractors and employees. When this happens, you are facing huge penalties and even jail time.
Do I Need an Accountant for Self-Employed Individuals? Looking for a Reliable “Accountant for Self-Employed Business Near Me”
When business-related tasks start to inundate you, it is time to look for an accountant for your self-employed business near you and get professional help. As your business grows, the work can pile up and you need someone to take care of the numbers while running your small business.
“I believe that all businesses need four people to work with: an attorney, an accountant, a banker, and an insurance agent,” says Steve, who has worked with several small businesses in Colorado. No matter the size, every business needs a professional CPA that they can turn to when critical accounting questions and clarifications arise.
If you are self-employed and need help with tax calculations and filings, you need a professional CPA, and Steven J. Wick & Associates, P.C. can assist you during these ‘taxing’ times. We have years of experience and expertise that your small business needs for accurate tax computations and timely filings to avoid penalties.
Steven J. Wick & Associates P.C. offers tax preparations, bookkeeping, and accounting services, as well as payroll and business consultation services, which will be helpful if business growth is in your plans. To get started, contact us right away!
Self Employed Articles
Turning your passion into a full-time business is a big step. But when your business starts to catch on, you realize that you made the right decision. Now, the next move is to sit down and look for an accountant for your self-employed business that is near you. An accountant will help you get your growing finances and tax obligations in order.
You can do a lot of money-related tasks on your own, especially when you are just starting. Business-minded people do not stop at the basics. If your aims are high and future expansion is on your agenda, hiring an accountant for self-employed near you is critical. Learning about the Colorado self-employment tax will give you an idea of the challenges of accounting for your small business.
What Does it Mean to Be Self-Employed from an Accountant’s Perspective?
Because you perform a job and collect a fee for it doesn’t mean that you are already “in business” unless you do it regularly and it becomes your source of income. Being self-employed and managing a small business means having the following:.
- A business structure
- Marketing Plan
- A product or service
- A separate and exclusive office or workspace
- It’s operational
- A separate checking account for your business
Running your own small business also means that you will have to take care of your self-employed taxes separately. Worrying about the tax would be a strong indicator that you are “in business”.
Guide for Creating Self-Employed Small Business
Having a start-up business, whether it’s small or big, requires you to go through a series of critical set-up processes. It is important to take care of these matters right away to make sure you are 100% ready to move forward with less burden on your shoulder.
Separate business and personal finances
When you set up a small business, make sure to keep it apart from your personal matters, especially in terms of finances. Doing this will make bookkeeping and accounting tasks easier for you.
Have an exclusive space for your business if you are operating from your home but it’s much better to rent an office where you can conduct business exclusively. It’s the ideal way to go if you do not want your personal information out in public.
Figure out what business structure you want and look for an accountant for self-employed businesses near you to guide you through it!
Decide what kind of business entity you will be registering as but it is advisable if you can find an accountant for self-employed near you to help you. There are four types: sole proprietorship, partnership, corporation, and LLC (limited liability company).
If you are doing business as an individual, registering as a sole proprietor or LLC would be fine. If with one or more business partners, you can opt for a partnership, corporation (S-corp or C-corp), or LLC. Each of these business structures has a different Colorado self-employment tax system and you need to be aware of the rates and deadlines.
You can spend time studying how Colorado self-employed taxes work or take the shortcut and find an accountant for self-employed individuals instead. If you like to focus on building client relations and developing your product and services, the latter would be the best option for you. A professional CPA will help you understand how self-employed taxes work and prepare the documents for you.
Apply for your own business bank account
As your small business finances need to be separate from your personal funds, it makes sense to apply for an exclusive business bank account. This will allow you to track your expenditures more easily and make smart budgeting decisions. It will also make tax preparations easier.
Different Business Structures: What Do I Need to Be as a Business Entity If I Am Self-Employed?
One of the most critical decisions you need to make as a self-employed individual is choosing the type of entity you would register as. There are four basic business entities: sole proprietorship, partnership, corporation, and limited liability company (LLC). Each entity follows varying taxation systems and has its own set of deductions. Keep in mind that the business entity does not determine your self-employment status. That said, you can still be considered self-employed under any of these business entities.
Here’s an overview:
Sole Proprietorship
As a sole proprietor, you are the sole owner and operator of the business. With this business entity, you do not need to obtain an EIN (employer identification number) but you need a BIN (business identification number). Although the EIN is not required, it is highly recommended that you still get one for social security purposes. You can get one through the IRS website.
Partnerships
If you are doing business with another person, you can register as a partnership entity. The agreement between two business owners can be verbal. But Steve of Steven J. Wick, and Associates. P.C. says he prefers to make partnership agreements formal.
For income tax filing purposes, partnerships have to obtain an EIN as required by the IRS.
Limited Liability Company or LLC
Among accountants, LLC is also known as a ‘chameleon’ entity because it allows your business to be neutral. It is also a business structure with the cheapest insurance and lets you separate business from personal matters in terms of taxes.
In Colorado, the registration fee for LLCs is $50 and $10 yearly to keep your organizational structure within the state. Even if you have no employees, you must obtain an Employer Identification Number (EIN) from the IRS for tax payments. Having an EIN will also make it easier for you to pay your taxes if you later decide to hire employees and elect your business as a corporation.
Consult an accountant for self-employed near you so you can better understand how LLC works.
Corporations
As yourself: “Do I need an accountant for my small business?” If you think a corporation is a more fitting entity for you and your partners, you may need one. Whether you are the sole owner of your small business or you have shareholders with you, you can register as a corporation. However, the self-employment tax rates in Colorado could be higher. On a positive note, you can enjoy various tax deductions that other business structures deny you.
Can I change business structures?
At some point, you may be tempted to switch from one business structure to another. The change could be due to business growth or tax advantages that you learn along the way. But are you allowed to change your business entity to another and is it easy? An accountant for self-employed near you can help you navigate your options.
Basically though, depending on the type of structure you want to transition to, you can change from a sole proprietor to a partnership. It’s easier if your business is initially registered as an LLC, allowing your business to have whatever business structure you want. However, changing from any of these entities to a corporation also changes a lot of things, not to mention the process can be complicated.
If you decide to do this, you should first find an accountant for self-employed near you for consultations. A professional CPA will give you an accurate heads-up on the changes in tax filings and walk you through the process.
Self-Employed Taxes: What You Need to Know
From an income tax standpoint, being self-employed and a sole proprietor is easiest in terms of the registration process. You can also enjoy several tax deductions as far as your business goes. However, you are required to pay an SE tax (self-employment tax). It is a self-secured medical tax, which regular employees also pay – 7.65%, shouldered by the employer, and the other 7.65% shouldered by the employee. This amounts to 15.3% which is higher than an income tax.
As a self-employed individual, you are also required to pay 15.5% in taxes if you are earning $400 and up. 2.95 of it goes to your Medicare while 12.4% goes to your social security fund and disability insurance. The SE tax must be paid quarterly and on time to avoid penalties.
In addition, you also have to pay your annual income tax. It’s another complicated issue if you are not an accountant and a professional CPA can help you figure out how much taxes you owe based on your earnings and registered business structure. You might as well start searching for an “accountant for self-employed near you early on.
All About Self-Employed Taxes
Are you required by law to file?
Then there is the process of determining your filing status, as well as figuring out if your income falls into the threshold which requires you to file income taxes. For self-employed individuals, even if your income is below the threshold requiring you to follow, it is often necessary to file your taxes anyway. This is because if you are filing with a partner, your income will have to be combined with hers. Additionally, your finished tax return is the best piece of documentation you can have to verify your income.
When it comes to small business accounting, including self-employment, it can be far more complicated to determine so many different aspects of how you should file, and what documentation you need. This is where your Fort Collins CPA comes in. They are familiar with the complexities of small business self-employment taxation, and won’t struggle to try to figure out which tax form, documents, and other paperwork you need. Also, they will be able to place you in the most appropriate filing category for your specific needs, whether that is a 1040 or a 1040 A. Your Fort Collins CPA will also be aware of numerous deductions and tax payment options, some specific to your area and even your business itself.
Paying Your Taxes
Additionally, as a self-employed individual, you have access to all the “tweaks,” and deductions that any business has. You are probably aware of some of them, but not all. One example of these “tweaks,” is when and how often to make your tax payments. Your Fort Collins CPA can help you determine which payment method is the best for you, based on several factors. For example, an annual tax bill can be quite burdensome, and most self-employed individuals and even several businesses opt for quarterly payments. You can also do a monthly payment. You do have several options when it comes to paying your federal and other taxes.
What can a self-employed individual deduct?
If you are not sure which items can be deducted, ask your small business accounting specialists. Essentially, ANYTHING that you buy, rent, or put any type of money into that is for your business usually qualifies as a deduction. Some things can be deducted entirely, others only partially.
It is prudent to start a filing system for your expenses. Any online software you like will work, but be sure and save all your receipts as well. You will usually be required to have tangible proof of your expenses. Your accountant can advise you, anytime, when you are not sure what to keep a record of. Additionally, they will know which accounting software can be the most useful and appropriate for your record-keeping, should you determine this is something you need.
If you work from home, there are several deductions for the self-employed individual. These involve determining the square footage of the workspace, as well as evaluating how much of your business time is used in that space. If for example, you rent a small warehouse, this will certainly be deductible. If you work from home, this may not be deductible — it depends on how much of your actual work is carried out from your home.
And, some things you purchase for work will actually not be considered deductions by the IRS, but investments. A simple example: you purchase a delivery van for your self-employment, thinking it will serve as a write-off. However, the IRS may see it as an investment, and not allow you to deduct the delivery van, but allow you to deduct mileage used on it for your business, maintenance costs, and other specific business-related expenses.
The IRS categorizes some of your expenses as capital, and others as expenses. And, these guidelines change frequently. Don’t assume, ask. When it comes to small business accounting, you need this information to determine what you should invest in. Your Fort Collins CPA can let you know if a specific item, piece of equipment, or service is deductible, and if so, how much.
The self-employed small business owner often can benefit more from the professional services of an accountant than just about anyone else. If you are self-employed, call your Fort Collins CPA and let them guide you through your taxes, you will be very glad you did.
Advantages and Disadvantages of Being Self-Employed
Advantages of Being Self-Employed
- You enjoy freedom in terms of work hours, the amount of work you take in, and how you want your work done.
- You can balance your work and personal life
- Earn at your own pace
Disadvantages of Self-Employment
- The self-employed taxes you have to deal with can be a daunting work
- Expect no benefits that regular employees have
- Cover the resources out of your own pocket
- Less job security
Biggest Mistakes You Can Make as a Self-Employed Small Business Owner
Individuals who try to brave the business world without support from an accountant are at risk of committing costly mistakes. Among the most common ones include:
- You can be too conservative or too liberal in terms of tax deductions, which could lead to more tax responsibilities.
- Failure to properly classify independent contractors and employees. When this happens, you are facing huge penalties and even jail time.
Do I Need an Accountant for Self-Employed Individuals? Looking for a Reliable “Accountant for Self-Employed Business Near Me”
When business-related tasks start to inundate you, it is time to look for an accountant for your self-employed business near you and get professional help. As your business grows, the work can pile up and you need someone to take care of the numbers while running your small business.
“I believe that all businesses need four people to work with: an attorney, an accountant, a banker, and an insurance agent,” says Steve, who has worked with several small businesses in Colorado. No matter the size, every business needs a professional CPA that they can turn to when critical accounting questions and clarifications arise.
If you are self-employed and need help with tax calculations and filings, you need a professional CPA, and Steven J. Wick & Associates, P.C. can assist you during these ‘taxing’ times. We have years of experience and expertise that your small business needs for accurate tax computations and timely filings to avoid penalties.
Steven J. Wick & Associates P.C. offers tax preparations, bookkeeping, and accounting services, as well as payroll and business consultation services, which will be helpful if business growth is in your plans. To get started, contact us right away!
Self Employed Articles
Turning your passion into a full-time business is a big step. But when your business starts to catch on, you realize that you made the right decision. Now, the next move is to sit down and look for an accountant for your self-employed business that is near you. An accountant will help you get your growing finances and tax obligations in order.
You can do a lot of money-related tasks on your own, especially when you are just starting. Business-minded people do not stop at the basics. If your aims are high and future expansion is on your agenda, hiring an accountant for self-employed near you is critical. Learning about the Colorado self-employment tax will give you an idea of the challenges of accounting for your small business.
What Does it Mean to Be Self-Employed from an Accountant’s Perspective?
Because you perform a job and collect a fee for it doesn’t mean that you are already “in business” unless you do it regularly and it becomes your source of income. Being self-employed and managing a small business means having the following:.
- A business structure
- Marketing Plan
- A product or service
- A separate and exclusive office or workspace
- It’s operational
- A separate checking account for your business
Running your own small business also means that you will have to take care of your self-employed taxes separately. Worrying about the tax would be a strong indicator that you are “in business”.
Guide for Creating Self-Employed Small Business
Having a start-up business, whether it’s small or big, requires you to go through a series of critical set-up processes. It is important to take care of these matters right away to make sure you are 100% ready to move forward with less burden on your shoulder.
Separate business and personal finances
When you set up a small business, make sure to keep it apart from your personal matters, especially in terms of finances. Doing this will make bookkeeping and accounting tasks easier for you.
Have an exclusive space for your business if you are operating from your home but it’s much better to rent an office where you can conduct business exclusively. It’s the ideal way to go if you do not want your personal information out in public.
Figure out what business structure you want and look for an accountant for self-employed businesses near you to guide you through it!
Decide what kind of business entity you will be registering as but it is advisable if you can find an accountant for self-employed near you to help you. There are four types: sole proprietorship, partnership, corporation, and LLC (limited liability company).
If you are doing business as an individual, registering as a sole proprietor or LLC would be fine. If with one or more business partners, you can opt for a partnership, corporation (S-corp or C-corp), or LLC. Each of these business structures has a different Colorado self-employment tax system and you need to be aware of the rates and deadlines.
You can spend time studying how Colorado self-employed taxes work or take the shortcut and find an accountant for self-employed individuals instead. If you like to focus on building client relations and developing your product and services, the latter would be the best option for you. A professional CPA will help you understand how self-employed taxes work and prepare the documents for you.
Apply for your own business bank account
As your small business finances need to be separate from your personal funds, it makes sense to apply for an exclusive business bank account. This will allow you to track your expenditures more easily and make smart budgeting decisions. It will also make tax preparations easier.
Different Business Structures: What Do I Need to Be as a Business Entity If I Am Self-Employed?
One of the most critical decisions you need to make as a self-employed individual is choosing the type of entity you would register as. There are four basic business entities: sole proprietorship, partnership, corporation, and limited liability company (LLC). Each entity follows varying taxation systems and has its own set of deductions. Keep in mind that the business entity does not determine your self-employment status. That said, you can still be considered self-employed under any of these business entities.
Here’s an overview:
Sole Proprietorship
As a sole proprietor, you are the sole owner and operator of the business. With this business entity, you do not need to obtain an EIN (employer identification number) but you need a BIN (business identification number). Although the EIN is not required, it is highly recommended that you still get one for social security purposes. You can get one through the IRS website.
Partnerships
If you are doing business with another person, you can register as a partnership entity. The agreement between two business owners can be verbal. But Steve of Steven J. Wick, and Associates. P.C. says he prefers to make partnership agreements formal.
For income tax filing purposes, partnerships have to obtain an EIN as required by the IRS.
Limited Liability Company or LLC
Among accountants, LLC is also known as a ‘chameleon’ entity because it allows your business to be neutral. It is also a business structure with the cheapest insurance and lets you separate business from personal matters in terms of taxes.
In Colorado, the registration fee for LLCs is $50 and $10 yearly to keep your organizational structure within the state. Even if you have no employees, you must obtain an Employer Identification Number (EIN) from the IRS for tax payments. Having an EIN will also make it easier for you to pay your taxes if you later decide to hire employees and elect your business as a corporation.
Consult an accountant for self-employed near you so you can better understand how LLC works.
Corporations
As yourself: “Do I need an accountant for my small business?” If you think a corporation is a more fitting entity for you and your partners, you may need one. Whether you are the sole owner of your small business or you have shareholders with you, you can register as a corporation. However, the self-employment tax rates in Colorado could be higher. On a positive note, you can enjoy various tax deductions that other business structures deny you.
Can I change business structures?
At some point, you may be tempted to switch from one business structure to another. The change could be due to business growth or tax advantages that you learn along the way. But are you allowed to change your business entity to another and is it easy? An accountant for self-employed near you can help you navigate your options.
Basically though, depending on the type of structure you want to transition to, you can change from a sole proprietor to a partnership. It’s easier if your business is initially registered as an LLC, allowing your business to have whatever business structure you want. However, changing from any of these entities to a corporation also changes a lot of things, not to mention the process can be complicated.
If you decide to do this, you should first find an accountant for self-employed near you for consultations. A professional CPA will give you an accurate heads-up on the changes in tax filings and walk you through the process.
Self-Employed Taxes: What You Need to Know
From an income tax standpoint, being self-employed and a sole proprietor is easiest in terms of the registration process. You can also enjoy several tax deductions as far as your business goes. However, you are required to pay an SE tax (self-employment tax). It is a self-secured medical tax, which regular employees also pay – 7.65%, shouldered by the employer, and the other 7.65% shouldered by the employee. This amounts to 15.3% which is higher than an income tax.
As a self-employed individual, you are also required to pay 15.5% in taxes if you are earning $400 and up. 2.95 of it goes to your Medicare while 12.4% goes to your social security fund and disability insurance. The SE tax must be paid quarterly and on time to avoid penalties.
In addition, you also have to pay your annual income tax. It’s another complicated issue if you are not an accountant and a professional CPA can help you figure out how much taxes you owe based on your earnings and registered business structure. You might as well start searching for an “accountant for self-employed near you early on.
All About Self-Employed Taxes
Are you required by law to file?
Then there is the process of determining your filing status, as well as figuring out if your income falls into the threshold which requires you to file income taxes. For self-employed individuals, even if your income is below the threshold requiring you to follow, it is often necessary to file your taxes anyway. This is because if you are filing with a partner, your income will have to be combined with hers. Additionally, your finished tax return is the best piece of documentation you can have to verify your income.
When it comes to small business accounting, including self-employment, it can be far more complicated to determine so many different aspects of how you should file, and what documentation you need. This is where your Fort Collins CPA comes in. They are familiar with the complexities of small business self-employment taxation, and won’t struggle to try to figure out which tax form, documents, and other paperwork you need. Also, they will be able to place you in the most appropriate filing category for your specific needs, whether that is a 1040 or a 1040 A. Your Fort Collins CPA will also be aware of numerous deductions and tax payment options, some specific to your area and even your business itself.
Paying Your Taxes
Additionally, as a self-employed individual, you have access to all the “tweaks,” and deductions that any business has. You are probably aware of some of them, but not all. One example of these “tweaks,” is when and how often to make your tax payments. Your Fort Collins CPA can help you determine which payment method is the best for you, based on several factors. For example, an annual tax bill can be quite burdensome, and most self-employed individuals and even several businesses opt for quarterly payments. You can also do a monthly payment. You do have several options when it comes to paying your federal and other taxes.
What can a self-employed individual deduct?
If you are not sure which items can be deducted, ask your small business accounting specialists. Essentially, ANYTHING that you buy, rent, or put any type of money into that is for your business usually qualifies as a deduction. Some things can be deducted entirely, others only partially.
It is prudent to start a filing system for your expenses. Any online software you like will work, but be sure and save all your receipts as well. You will usually be required to have tangible proof of your expenses. Your accountant can advise you, anytime, when you are not sure what to keep a record of. Additionally, they will know which accounting software can be the most useful and appropriate for your record-keeping, should you determine this is something you need.
If you work from home, there are several deductions for the self-employed individual. These involve determining the square footage of the workspace, as well as evaluating how much of your business time is used in that space. If for example, you rent a small warehouse, this will certainly be deductible. If you work from home, this may not be deductible — it depends on how much of your actual work is carried out from your home.
And, some things you purchase for work will actually not be considered deductions by the IRS, but investments. A simple example: you purchase a delivery van for your self-employment, thinking it will serve as a write-off. However, the IRS may see it as an investment, and not allow you to deduct the delivery van, but allow you to deduct mileage used on it for your business, maintenance costs, and other specific business-related expenses.
The IRS categorizes some of your expenses as capital, and others as expenses. And, these guidelines change frequently. Don’t assume, ask. When it comes to small business accounting, you need this information to determine what you should invest in. Your Fort Collins CPA can let you know if a specific item, piece of equipment, or service is deductible, and if so, how much.
The self-employed small business owner often can benefit more from the professional services of an accountant than just about anyone else. If you are self-employed, call your Fort Collins CPA and let them guide you through your taxes, you will be very glad you did.
Advantages and Disadvantages of Being Self-Employed
Advantages of Being Self-Employed
- You enjoy freedom in terms of work hours, the amount of work you take in, and how you want your work done.
- You can balance your work and personal life
- Earn at your own pace
Disadvantages of Self-Employment
- The self-employed taxes you have to deal with can be a daunting work
- Expect no benefits that regular employees have
- Cover the resources out of your own pocket
- Less job security
Biggest Mistakes You Can Make as a Self-Employed Small Business Owner
Individuals who try to brave the business world without support from an accountant are at risk of committing costly mistakes. Among the most common ones include:
- You can be too conservative or too liberal in terms of tax deductions, which could lead to more tax responsibilities.
- Failure to properly classify independent contractors and employees. When this happens, you are facing huge penalties and even jail time.
Do I Need an Accountant for Self-Employed Individuals? Looking for a Reliable “Accountant for Self-Employed Business Near Me”
When business-related tasks start to inundate you, it is time to look for an accountant for your self-employed business near you and get professional help. As your business grows, the work can pile up and you need someone to take care of the numbers while running your small business.
“I believe that all businesses need four people to work with: an attorney, an accountant, a banker, and an insurance agent,” says Steve, who has worked with several small businesses in Colorado. No matter the size, every business needs a professional CPA that they can turn to when critical accounting questions and clarifications arise.
If you are self-employed and need help with tax calculations and filings, you need a professional CPA, and Steven J. Wick & Associates, P.C. can assist you during these ‘taxing’ times. We have years of experience and expertise that your small business needs for accurate tax computations and timely filings to avoid penalties.
Steven J. Wick & Associates P.C. offers tax preparations, bookkeeping, and accounting services, as well as payroll and business consultation services, which will be helpful if business growth is in your plans. To get started, contact us right away!
